Reduction of Value-Added Tax: Stimulate consumption demand, promote growth

VCN - In the current difficult context, reducing value-added tax (VAT) is an arrow that hits many targets, both supporting people and businesses and promoting economic growth. This solution is important in stimulating consumption - one of the three-horse carriages "investment - export - consumption" to promote economic growth in 2023.
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Reducing the 2% VAT will help stimulate consumption demand and remove difficulties for businesses and the economy. Photo: H.Anh
Reducing the 2% VAT will help stimulate consumption demand and remove difficulties for businesses and the economy. Photo: H.Anh

Focus on stimulating consumption demand

In 2023, difficulties and challenges for the economy and business operations are increasing, creating great pressure on macroeconomic stability and affecting the recovery and development of many industries and fields. GDP growth in the first quarter of 2023 was much lower than the set target, reaching only 3.32%, creating a challenge to the growth target 2023.

In that context, to have more solutions to support businesses, people, and the economy to recover, based on assessing the achieved results of the 2% VAT reduction solution according to Resolution No. 43/2022/QH15 Regarding fiscal and monetary policies to support the 2022 socio-economic recovery and development program, the Government has continued to propose the implementation of the 2% VAT reduction policy according to Resolution No. 43/2022/QH15 from July 1, 2023, to the end of December 31, 2023. This plan aims to ensure the correct target of stimulating consumption demand in line with the current economic context, thereby promoting production and business activities to recover soon and develop to contribute back to the country's economy and State budget. Applying this policy in the last 6 months of the year will reduce state budget revenue equivalent to about 24 trillion VND.

Assessing the impact of this solution on economic growth, Minister of Finance Ho Duc Phuc said that reducing VAT will contribute to reducing the cost of goods and services, thereby promoting production and business. More jobs for workers contributing to macroeconomic stability and economic recovery in 2023. As for the people, this is the object that will directly benefit. The reduction of VAT on goods and services subject to the 10% VAT rate will reduce selling prices, thereby directly reducing people's costs in consuming goods and services. Enterprises that produce, trade in goods and provide services subject to VAT at 10% will benefit when the policy is issued. Reducing VAT will contribute to reducing production costs, and lowering product costs, thereby helping businesses increase resilience and expand production and business.

Stimulate the domestic market

From a business perspective, Dr Mac Quoc Anh, Chairman of the Hanoi Association of SMEs, said that promulgating the 2% VAT reduction policy as applied in 2022 would encourage people to spend more, contributing to supporting businesses and people. Stimulating production and business and lowering product prices, increasing domestic supply and demand, thereby contributing to economic growth in 2023.

Sharing with Customs Magazine, Mr Chu Hung Le Huy, Director of Huy Hoang Industrial Gas Service and Trading Co., Ltd (Hanoi), said that from the beginning of the year until now, due to the production situation of enterprises facing many difficulties, the sales volume of the Company also decreased compared to previous years. Additionally, input costs generally increased; for example, bank interest rates increased. Although banks have recently had a downward adjustment, the reduction is not much. In that context, reducing VAT will help businesses reduce input costs, reduce costs, consume better products, and improve cash flow. Businesses in many different industries will also benefit from this policy because the price of goods in the market will cool down, stimulating consumption demand.

According to delegate Vu Tien Loc (Hanoi City National Assembly Delegation), currently, Vietnamese businesses are facing many difficulties, and the greatest difficulty is the market. While the export market is very difficult, what we can influence is the domestic market. One of the very important measures to support people and businesses is to apply tax reduction policies.

In the context of difficulties, the burden for growth is always placed on the shoulders of domestic consumers and the domestic market. Stimulating domestic market demand is an extremely important solution. Reducing VAT is a solution aimed at both objects. One is drilling people's energy, making people less difficult, and secondly, it has an immediate impact on the market of businesses, so the delegates highly agreed to continue implementing this policy. The fact that the National Assembly continues to reduce VAT by 2% in the coming time is the right policy and can be put into effect immediately", Mr. Vu Tien Loc analyzed.

By Hoai Anh/ Phuong Linh

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